Monday, November 24, 2003

Jeremy Zawodny says I'm "clearly wrong" about Microsoft's investors. OK, yes, I didn't mention that Bill Gates owns a ton of Microsoft stock. I didn't do that maliciously. I figured everyone in the world already knew that. But, he doesn't own the majority of the stock. Much of it is owned by common citizens. Doesn't invalidate my point.

One other point, his headline says "Scoble Lies." That's unfair. 85% of our stock is owned by "non-insiders."

Oh, also look at one other thing: IKEA does almost no advertising. Except for a cool catalog that arrives in Maryam's mailbox once a quarter. Compare that to Best Buy and Fry's. They advertise all over the place. TV. Newspapers. That advertising costs big dollars. A "TechIKEA" would change that equation radically.

As part of my "Silicon Valley customer education" I visited a Best Buy in East Palo Alto with Dave Winer. Dave had $3000 burning a hole in his pocket. Well, heating up his Visa card anyway. The Best Buy is literally a mile from Steve Jobs' home in Palo Alto. The center of the technology world. It should be a showcase of retailing excellence.

Here's a hint: Dave walked out without buying anything (and we went to Ikea instead for a meatball lunch).

So, what did Best Buy do wrong? Several things and it isn't just Best Buy.

The retail industry seems to be giving up the fight. Everything inside the store screamed "we know you're gonna buy a Dell anyway." I agree with Acer's chairman. This is a big mistake.

First retail mistake: Letting me close to the merchandise. Why? They didn't have enough choices. When we saw that they instantly lost the sale. Solution: hide all laptops behind a counter where you have to "consult" with a salesperson.

Second retail mistake: No good central place to go to get information and the information we did get was incomplete. For instance, the price tags on each notebook didn't include the weight of the laptops (and, each was held down with a security bar so you couldn't pick it up to see how heavy it was). Solution: have a central place where we can see information on ALL the models in the market (not just the ones Best Buy stocks) and look up anything, including weight, price, etc. (and make it so that Best Buy can at least get us whatever we want, albeit at a premium price. Dave actually wanted to buy from Best Buy. Mostly to get a new computer now, but partly cause it's a national chain and he'd be more likely to get good service when back home in Boston.

Third retail mistake: Having salespeople who weren't empowered over the process. What went wrong? We found an HP model we were interested in. But, the salesperson couldn't turn off the screen saver. Someone else had locked it and this salesperson didn't know the code to turn it off. The salesperson looked incompetent and any confidence we had in the guy eroded fast after that. Solution: empower salespeople with real information and make sure they control every part of the sales process (or, do what Ikea does and get rid of them altogether, but more on that later).

Fourth retail mistake: Having a chaotic space that doesn't lead customers through the sales process. What's the sales process? Well, when I sold cameras I'd start out every conversation with "do you want an SLR or a pocket camera?" I'd get an answer. Then I'd ask "do you want a good one or a cheap one?" Do you see that I'm leading them down a path to a purchase? That's the sales process. The Best Buy didn't even attempt to get me to enter into a process. Solution: hide the stock from the customers and have a consultatative sales process that goes like this:

Salesperson: "Do you want a laptop or a desktop?"
Customer: "I want a laptop."
Salesperson: "Do you want a big screen, or a lighter laptop that you could more easily carry around?"
Customer: "I want a small one I can carry around."
Salesperson: "Do you care about brand name?"
Customer: "Yes, I don't want a Sony or a Macintosh. I'd like an IBM Thinkpad cause that's what all my friends are telling me to get."
Salesperson: "Do you want the ability to use your laptop while standing up, or do you want to read the news while on the couch?"
Customer: "I don't see myself using it while standing up, but I do like to use a computer while sitting on a couch."
Salesperson: "Can you afford more than $2000?"
Customer: "Yes, but most of the systems I've seen are around $1300. Can you give me a reason to spend that much?"
Salesperson: "Do you care about screen resolution or weight more?"
Customer: "I need something that I can take to conferences and carry around all day long."
Salesperson: "OK, here's the three models I think you'd most like. The first is a Toshiba Tablet computer. I picked that because you said you wanted to read on the couch and the Tablet form factor lets you switch the screen around so you can hold it like a book and curl up on the couch like this. The second one is an IBM Thinkpad T-series. Unfortunately we don't carry those here, but I can recommend a partner of ours that can get it. Third is a Hewlett Packard Tablet PC because it's lightweight and fits everything you wanted."

Now, compare that to our experience. We lost confidence right away because Best Buy only had one Toshiba in stock (a Tablet PC) and only two lightweight notebooks (a Sony and the Toshiba Tablet). Plus, the salespeople never entered into a consultative sales process with us. He didn't know the market and couldn't even unlock his own computer.

Now, why is that? Well, when I talk with the folks at retail places I realize that the only way they think they can make the sale is to reduce the price. Funny thing, though. Best Buy has a "bricks and mortar" store. Translation: high overhead. They'll never be able to reduce the price enough to compete with the mail order stores, right?

Well, now we get into IKEA. This store proves that the Internet is not gonna take over retailing anytime soon. This store shows the future of direct retailing. So, what did IKEA do?

First, they fired all the salespeople. Since there was no way to train salespeople to enter a consultative sales process and there's no way to make them efficient enough to get the volumes that low margins dictate, they just did away with them altogether. Dave and my son and I walked through about half of an IKEA and did not see a single salesperson, despite literally passing 1,000 customers in the 20 minutes we spent walking to the cafeteria.

Firing the salespeople reduces cost. Point #1.

Second, IKEA forces customers to go through a sales process. It is nearly impossible to go through an IKEA without walking through the entire store. And, guess what, the process leads you through every part of your home needs (bedroom, bathroom, garage, office, and then to a warehouse, and finally to a cash register).

Third, IKEA has one store for every three million people. There are only two huge stores in the San Francisco Bay Area. Only one for Seattle. Best Buy, on the other hand, has one store for every 500,000 people. In Silicon Valley alone there's three stores (I think, maybe more). That raises overhead. IKEA can have a bigger selection, and less stock, and they are more efficient about moving that stock around.

So, what I am wondering is if we could do an "TechIKEA." In some ways Fry's Electronics tries, but comes up short. Fry's still doesn't have enough selection or enough efficiencies to really make this model sing like IKEA does (Fry's, for instance, has something like half a dozen stores in Silicon Valley alone. That tells me it's vulnerable to someone who comes in with a bigger store, better selection, and lower prices due to lower overhead).

One other thing? Microsoft has to do a better job of getting selection from OEM's into stores. Best Buy in freaking Palo Alto only had only one Tablet PC on the shelf. This isn't Kansas, it's Silicon Valley within a mile of one of the most educated and richest populations in the world. That's inexcusable.

Jeff Sandquist is trying to guess what Dave Winer is up to. He has a great idea. Instead of putting the onus on weblog writers to add metadata to our posts (I hate putting titles on my posts, for instance, or even clicking a box when I post) why not give that power to readers? Let them add the metadata that will make weblog posts more useful to more people.

By the way, I added a title to this post, but not to the others. Just so those of you who are reading in RSS news aggregators can see what it looks like when I take the time to do that.

On the "conflict theme," today a reborn Silicon Valley company invited me to an internal meeting. We had a "gentleman's NDA" to not disclose the meeting, but we all found it very strange to have a Microsoft employee there. Why? Cause they were planning to build a product that competes with one of our products (conflict). But, they also build on top of Microsoft technology (partnership).

That leads to some interesting tension. Microsoft usually wouldn't have gotten invited to this kind of meeting -- yes, I could take what I learned and reported it to the team this company will compete with. Personally, I learned something over the weekend that's very important: If I want to tell a team at Microsoft something, I say it on my public weblog. On Saturday I told the FrontPage team what they were doing wrong, and by Saturday evening I had a long email from one of the top Program Managers on the FrontPage team.

So, why was I there? My weblog and relationships. I'm on vacation. I'm trying to learn more about how customers, partners, and competitors view Microsoft. So, I agreed to come in and have an open discussion with this team. I was not paid by either Microsoft or this company for participating in this meeting. Totally done on my own dime. I don't have any stock or interest in this company. They liked what I had to say and wanted to see if we could work together.

We even joked around about it. The CEO reminded everyone at the table "hey, Microsoft is here." We all had a good laugh and then had a great discussion about their future and what they are trying to do.

And, so, another chapter in Silicon Valley history gets opened. It'll be interesting to see how else Weblogs can be used to overcome natural conflict. Imagine if our world leaders would weblog? If Microsoft and a Silicon Valley company can break bread, can Israel and Palestine?

I love the idea of having an artist perform inside my house every night. Here's the latest on Jeff Sandquist's mural that's taking shape inside his home. Keep in mind, Jeff's not one of those "rich" Microsoft employees. Yet I think this is cooler than anything I've seen inside most "rich guys" homes. Why? Cause it's one-of-a-kind and you gotta get invited into Jeff's home to see it. Thanks to the power of the weblog world we all can follow along. How much of the world's art is hidden from public view? Did you know that Microsoft owns one of the world's largest art collections? Wouldn't it be cool if that collection would be put on the Web for all of us to enjoy? I know I greatly enjoy the art that hangs in our hallways.

Robert Scoble works at Microsoft. Everything here, though, is his personal opinion and is not read or approved before it is posted. No warranties or other guarantees will be offered as to the quality of the opinions or anything else offered here.